Reuters reported that India is considering restricting imports of some products from Malaysia including palm oil, according to government and industry sources, in reaction to the Southeast Asian country's leader slamming New Delhi for its actions in Kashmir.
The benchmark palm oil contract for December delivery on the Bursa Malaysia Derivatives Exchange fell 0.9pc to 2,185 ringgit ($522.23) per tonne.
The market however is still up by 1.7pc on the week.
Palm oil was earlier also weighed down by a stronger ringgit, its currency of trade, which makes it more expensive for foreign buyers.
The ringgit was stronger against the dollar by 0.1pc at 4.1840 around 1050 GMT on Friday.
"Prices were earlier up on soyoil and Dalian strength," said a Kuala Lumpur based futures trader, referring to U.S. soyoil on the Chicago Board of Trade and related edible oils on China's Dalian Commodity Exchange.
"Towards the end of the trading session there was news of India restricting Malaysian palm oil... Prices dropped sharply."
In other related oils, U.S. soyoil futures on the Chicago Board of Trade were last up 0.7pc.
The January palm oil contract on the Dalian exchange rose 1pc, while the January soyoil contract on the Dalian exchange was up 0.7pc.
Palm oil is affected by price movements in related oils as they compete for a share in the global vegetable oils market.